>> i think the thing that continues from last year into this year is uncertainty. >> you throw on this banking turmoil we have had and now you are talking about another layer of risk to economic growth. >> we expect to slow down, a pretty substantial slow down but we are not expecting contraction. >> this is bloomberg surveillance with tom keene, jonathan ferro and lisa

abramowicz. jonathan: live from new york city, this is bloomberg surveillance on tv and radio. equity futures are down .25%. tom: atlanta gdp up from the 3% number. the comfort has disappeared in the last 24 hours. a10 year real yield is under 10%? jonathan: it's shifting lower after this unexpected week. lisa: stocks are not responding with the lift. typically you get a lift when you think the fed is going to be cutting rates or softer economic data.

now we are getting stronger. tom: who is talking about cutting rates? i don't hear one single fed official framing that idea. jonathan: in the market disagrees with them. they are looking for its a stay at 5%. for much of the year, we have been pricing in cuts. now you start to appreciate why we may be pricing in rate hikes. lisa: are we reaching the point everyone has been waiting for. that softer economic data will be leading to lower earnings? one big question is fed

credibility. loretta mester talked about 5% in the market says we think you are wrong. jonathan: no two rate cuts are created equally. it's not about whether you get rate cuts but why you get rate cuts. that is five consecutive months that we've had it in contracture. tom: there has been adjustment here to a growth slowed down. i have not seen it in the confusion of the u.s. dollar. i need some signals from the currency market and we are not getting them yet. jonathan: is this a politics free zone? lisa: i wish it were but i think the problem is this dominates a lot of the news and it raises policy questions.

i think there is a question about the election next year. the republican leadership and what can get done as a fish wide incident d.c.. tom: jonathan wasn't here and a british voice would have been welcome. leslie and richard haass were great yesterday. we need to cover it with the confidence of the nation away from the eyewitnesses and cable journey. jonathan: cable news is lapping it up. the hike train straight back to the 2022 plate. lisa: it's a gift to ratings. tom: this started with white bronco.

jonathan: don't give the president ideas. tom: our team has done a great job on this. jonathan: we will catch up with anne-marie it a little bit later. s&p is down .22%. year to year at the moment is 3.88. your 10 year is 3.35. lisa: loretta mester was with our michael mckee. she talked about keeping the fed fund rate above 5% for a prolonged period of time.

let's see if the two year yield took notice. so far, they are not. the fed credibility gap that continues in markets. we get a slew of economic data. french president emmanuel macron is traveling to china. curious to see this pairing in direct conflict with kevin mccarthy is to taiwan. is there fisher between europe and the u.s. in trading with china? that speaks to the economic data we are getting today. ism services data, that does matter after the big disappointment we saw in manufacturing. do we get a repeat of what we saw yesterday?

the response and markets of stocks going down was so interesting to me because it implies that we are winning the fight in terms of tightening and loosening tight labor market. jonathan: joining us now is george saravelos from deutsche bank. european exceptionalism is not something we talk about in a good way. but you are, why? george: this talk around the labor market is critical in establishing that diverge meant. wages have been moving down for the last few months. some of the key indicators have been coming down. in contrast, wages are

accelerating. the data doesn't get much publicity but it's up 5%. so the european labor market is tied to that number, i don't think that is something that is accommodating and market pricing. tom: i went back and forth with mohamed el-erian there was a 3.1 deviation joan. there seems like there are dynamics beginning to happen. the cliche is raised to the bottom. what does the race look like when we look at nations that are forced to raise interest rates? george: the market is embedded in this framework.

if the economy is slowing the dollar since to do well. this is an unusual cycle, last year you had dollar exceptionalism and all the countries outside the u.s. suffered from the energy shock. these are now reversing which is why we see reverse divergence. the fed will be the first in the easing cycle. we do not know when but we have high confidence that is the case because there are a few things happening in the u.s. at different from the rest of the world. the labor market is about to ease but we have to look at fiscal policy. when people try to predict where fed funds will be in six months, 10 months, it's impossible to make that prediction without knowing what will happen around the debt ceiling.

the last time it happened the fed did an operation twist. we have to look as a major risk over the summer while in the rest of the world you see fiscal easing because energy prices are coming off and that's what is leading to these divergent central-bank behaviors. lisa: a lot of people disagree with you, you see a lot more potential for dollar weakness. how we could it gets against the euro? george: historically, if you go to 1999, the narrowest range is 10 big figures and that was in the low volatility environment. in a normal year we should be doing 16 big figures.

if we cannot rake to the downside it must mean that the euro will have to enter into a 110 range. if you take a step back, rate differentials are back to what they were this time 18 months ago. energy prices have reversed and back then the euro was $1.15. jonathan: you are saying the high of the year becomes the floor of the range from here onwards? george: one in five is a low of the year. by extension, if you start thinking seven figures will make the 115 even that's too narrow. jonathan: george saravelos

of deutsche bank. we get into payrolls on friday? have we not set lineup yet? it stays away. tom: job state is not a small matter. jonathan: i believe that special programming begins at 7:00 a.m. eastern time. tom: when is this? jonathan: that's going to be on friday. this is the promo. maybe we can make a graphic you make it special. gargi pal chaudhuri

from blackrock financial up next. lisa: keeping you up-to-date with news from around the world. donald trump denounces his indictment. the former president spoke of his estate in florida hours after he pleaded not guilty to the 34 counts of his records. taiwan calls the meeting with kevin mccarthy a rare opportunity. she met with members of the party and the republican library. brinson johnson was elected to chicago's new mayor. he defeated paul fallis who made crime the focus of his campaign.

johnson wants to raise taxes on corporations to boost chicago's revenue. in the u.k., business confidence crept up but only a third of firm saw an increase in sales. inflation is weighing on consumer spending and adding to cost for companies. johnson & johnson has agreed to spend 8.9 billion to resolve all cancer lawsuits tied to the talcum powder. it will make a new attempt to contain viability with the bankruptcy filing in one of its units. powered by more than 2700 journalists and analysts in more than 120 countries. i am lisa mateo and this is bloomberg. ♪

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>> donald trump, mr. cohen and others agreed in 2015 two a catch and kill scheme. a scheme to buy and suppress negative information to help mr. trump's chance of winning an election. >> the only crime i've committed is to defend our nation from those who seek to destroy it. jonathan: that was manhattan district attorney and donald's response. live from new york city this morning, good morning. equity futures are -.21%.

on the ism services after manufacturing came in weaker than expected. that is soft economic data you've been expecting. in the 10 year is higher by a couple of basis points. tom: maybe the view of mr. of cleveland is 5% then pause. what are the ramifications of pause, pause, after july? jonathan: they have no idea of the consequences of last month are going to be. we have been talking about long and variable lags of interest rate hikes and we should be

talking about bank volatility. lisa: we talked about the banking crisis being over. the kb x index saw decline. can we really call this over at a time when there is so much uncertainty? tom: it's important to overlay this with cre commercial real estate. i don't think for the banks it's just about stupidity and silicon valley. it was a historic moment yesterday. mr. lever has had much

experience working with mitch mcconnell. i want to encapsulate this. you talk about the storylines. if this is going to be a long trial, how do the storylines change towards the primaries? towards a labor day of 2024 when they get serious? >> the challenge for every other republican is that donald trump continues to soak up all the oxygen in the room. when he made his announcement in november, he was basically ignores which created an opening for ron desantis. but as soon as he says he's getting indicted,'s desantis is slipping. he was unprepared for the type of attacks trump was leveling

against him. it gives trump a daily platform for fundraising which is been the oxygen supporting his career for years. tom: i think about mcconnell going into dixson ends -- is there someone to say is can be hard to get to 50% during an election? jon: president trump doesn't need to get 50% of the electorate, he can win iowa and some early primary states and with a decent showing in a splintered field means he could be that republican nominee and have a shot at drawing another

inside straight by losing the electoral college. he came close to winning the electoral college in 2020. he lost by 44,000 votes in three states. if i am trump i believe i have a shot at making the magic come back. lisa: given the fact that so many people have pushed back against some of president trump antics, why does the rank-and-file get behind him including romney of utah who voted twice to impeach him? jon: i thought romney's statement was incredible. these fraud charges are being brought by a liberal prosecutor in manhattan.

how can he expect to get a fair environment in this trial? with these same charges be brought against other public figures or politicians and mitt romney says probably no. one of the advantages trump has his that it is a political prosecution so other republicans rally around that which demonstrates trump's strength and durability with the republican base. lisa: how much does this dovetail into policy implications? whether they can get a debt ceiling agreement past or come up with the new joint statements to partner with europe? george: the only policy implications are it makes it a slightly higher probability that you have a president kamala harris.

this increases the odds that biden gets reelected. the life expectancy of an 83-year-old is a great. this will make it harder for things like a debt ceiling to get done. harder for republicans to cooperate and renew opportunities to investigate joe biden and his family in a form of retaliation. that's how they plan on using the gavel. jonathan: that's a depressing into the conversation. lisa: normally i don't go full mortality. tom: he mentioned something that

doesn't get repeated enough. the electoral college being just 40,000 votes. that is what trump is hoping for. jonathan: the president leads in the polls for the republican primaries but when it comes to the head-to-head, desantis does better than him. lisa: this explains how polarized the nation is. the primary system caters to the divergence rather than the big center the rest of the country has. why is that all these republicans are getting behind former president trump? jonathan: can you help this foreigner understand why you vote for judges, why they campaign and say they want to do

x, y, z? lisa: are you thinking about wisconsin? jonathan: i'm thinking of the d.a.. more broadly, why do these individuals campaign like politicians and oversee legal issues that are meant to be free from politics? lisa: some people argue there are different ideologies within the judicial system that go beyond different strands of thought. jonathan: thank you for that. from new york, this is bloomberg. ♪ you rise to the challenges of today, when active investing and disciplined risk management

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jonathan klein snapped a five-game alley. equity features adding to it. -.2% on the nasdaq. also, a little bit of a softer negative into the bond market. good morning to you all. use our higher. you'd slower yesterday off the back of softer than anticipated data. tom: we got down to 382 and we

have out the ramification of breaking down or up. we are at support and at resistance. jonathan: it is a real back away from that level this morning. lisa, i think you opened the show on the right point. it is just a little different this year. lisa: speaking to potential the weaker earnings and negativity for stocks. it has not come to pass just yet. tom: i think this is a heated topic right now.

john, i think there is so much gloom here. yes, apple went up a million percent. jonathan: we are down about .2%, tom. tom: the chief investment officer in austin. the linkage of economic data into the market. how are you indicating slowdown now? >> it has been very perplexing. you have stocks that have rallied. and we also have data that tells

us to be cautious. it is a very strong signal that things will be weaker. even inverted yield curve for nine months, and by a large degree, that is a good sign of weakness. now we have a banking crisis. i will admit that all of the weakness on the industrial and commercial side is being offset by an incredibly strong can room. you were talking about the labor market remaining strong. wage growth continues to be strong. people are spending money and this is a very consumer driven economy. there is a lot of caution, but it is pulling the economic side along.

lisa: over the past six months, how you came into the year and where you are now in europe -- your beliefs and positioning. >> we have been fairly bullish on fixed income. they have had the sharpest and quickest tightening cycle that we have seen in generation. all of that bad news already in the bond market. equities is where we have grown a little bit more cautious. we think that there are opportunities, but with negative data, we have grown a little bit more cautious. lisa: why is it bad news for stocks?

>> there are a lot more pressures, but it is also what you are paying for it. earnings have come down and valuations have gone up. if we are going to be valuation sensitive, we have fewer reasons to buy into the market. lisa: how much are you looking at it? >> it has been remarkable. we called it revenge of the growth stocks. they really underperformed in 2022 and then had a massive reversal. we are pulling on the reins. we are equally weighted. and we are looking at

opportunities outside the u.s. as well, where we think there is already more bad news. tom: what are you doing with cash? are your clients comfortable being there? >> we are not overweight in cash. i will admit that there is a lot more discussion around cash. it is an asset class. i think it is being used more meaningfully. jonathan: can i have -- can i be invested and use cash? >> we are invested in stock bonds. but we are not going to take a large defensive cash position. jonathan: you can get some return on cash. being in cash does not mean what

it used to mean. lisa: it is a great point. people used to say it would be into your returns. at what point is cash no longer the attractive option versus stocks? will it take stocks going down? that is some of the risk reward measurements. jonathan: what do you think the numbers in the money market funds over the last week or last month? is it just a rates play? what does it speak to? lisa: both. more than the actual yield. that is the reason why, if you shore up confidence, there will still be problems. tom: it is a wonderful return to something 30 years ago.

i remember the absolute panic that they would take over the world. it is going to be original, but it has been a massive will.. team coverage. you have the first top, the banking analysis and the middle part. jonathan: are we going there again? tom: we went there yesterday. he has a full page print out of a wall street journal op-ed. we had a fun time. it is like a civics lesson from jamie dimon. i am not critical of it. but every year, there is team.

jonathan: how much daylight is there between running the company? tom: what do you think, lisa? lisa: that is exactly how i read it. i looked at it as less as a run for president and basically a pitch for the banks. stop persecuting us because we are good actors in all of this. do not over regulate us and do not be ridiculous with this. by the way, your regulations are what caused this situation in the first place and now you have losses. tom: the irony of the jamie dimon letter after what i observed at the meeting. talk about a guy with clear emotion. john, you covered this for years. that was stunning.

jonathan: what is interesting about the recent reporting is how quickly they got in touch. i was like, this might be in the cards. they were basically preparing this ahead of time. lisa: he was in advanced talks about this and then all of a sudden, the swiss national bank says they were minutes away from bankruptcy, potentially. tom: i am at your take is that it is more cultural than we think. i do not really understand the swiss take on this. jonathan: i'm sure every time we come on tv, the swiss people hate it. you bump into somebody and they say, i could not care less.

lisa: we should bring somebody on and ask them about it. this is a banking culture and now they have one after losing the other. tom: they are up 12% off the bottom and up five, maybe 6% in recovery. the market, i would suggest, is lacking this in some form of recovery. lisa: the fact that the bonds have almost recovered entirely -- are we looking at credit cease? it is idiosyncratic with respect to the banking industry. it is different. i think -- i just said any no syncretic. jonathan: i think it is embarrassing the swiss.

lisa: i would agree. tom: she said idiosyncratic. it is a drinking game. jonathan: pinky for that. i have not missed this. equity futures, down about .2%. you can clear your throat during the break, if you want. tom: it is not like clearing my throat. jonathan: 336 from new york. and then on to payrolls on friday. just a couple days away. ♪ >> keeping you up-to-date with news from around the world. i am lisa mateo. donald trump has put his

comeback bid for the white house back in the forefront. after pleading not guilty to falsifying business records in manhattan, the former president spoke to a crowd of supporters where he called the indictment politically motivated. in wisconsin, democrats have won a majority on the supreme court in 15 years. they will consider a case that could determine access to abortion. they spent $28 million, making it the most expensive state supreme court case in u.s. history. the u.s. will provide ukraine with more military aid. the package includes more ammunition for the missile system and artillery rounds. ukraine has emphasized the need to boost defense. the crackdown on -- authorities have launched an investigation into the former

chairman and party chief of the everbright group. it comes after anticorruption regulators began a fresh round of check. the integration of credit suisse will take three to four years, and that does not include the wind down of the bank. he says even with protection in the form of swiss government support, there is a huge amount of risk in the deal. global news, 24 hours a day, on air and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. i am lisa mateo and this is bloomberg. ♪

>> this transaction is the first merger of important banks.

this is not in any way an easy deal to do. stabilizing the situation required urgent action. jonathan: we will catch up with manus cranny in just a moment. heading towards payrolls on friday, equity futures look like this. yields are lower over that previous couple of days. higher this morning by to be of basis points. tom: we were just following that a little bit. 3.80 would be a huge deal.

lisa: this is where you get really fuzzy. if you look under the headlines, the rate was actually upgrades. that is confidence. it is a little less soft than people think, and yet people use the data to confirm the narrative. jonathan: i remember when hipsters would ignore it. remember that? it became a thing for the federal reserve. lisa: i was about to say. i think she would love it. tom: manus cranny is always a macro hipster. best interview i have ever seen was manus cranny corralling the titan against a metal fence saying, you are not moving until i ask this question.

manus cranny, that famous interview that you did years ago. you were younger and he was not. you had him pinned against a wrought iron fence that he could not get out of the way. what is sergio like, as you have covered him over the years. manus: this man is very exacting. i jacked him out of a bank of america conference and i said, what do you want to send to the market? he said, you are the most overpaid the reset. he said bring me a my gado, and i did. today is the day for the irish and there is a message. it is a long and the road. tom: i have heard this before. now saving the swiss banking

system, my answer is, a guy like keller moves way faster than the published timeline. what do you expect in the next six months? manus: let's put a few guardrails up. information is key. then you are going to ask yourself quick the because he is the man that downsized the investment bank and his timeline -- i agree with you. they must understand the risks that they take. we are well on our way. tom: they have been through this 30 years ago. the swiss banking core stole the ubs name and remodeled the swiss taking core.

what are they going to do with two cultures again? menace: it would be presumptive of me to say, raised the bar. this is about a culture, which they built colleges about risk management. over the credit suisse, it was a little bit more swagger. build the business in. there was a difference in knowing your client. not to need to say whether they were higher or lower. do not presume that every dollar is jumping up and over the bench. it is a different climate and that is the era about risk management and keeping it tight.

lisa: what are some of the first steps versus the last steps? manus: the first step, people are already going. you have a pod, a group and they are on the move. you pick which parts that you want to keep. but when it comes to the other major issues, we are talking two to three branches. he do not need that and you do not meet headquarters in every major country around the world. the first issue is getting the

politicians and the country on void to allow you -- there will be downsizing that affect a lot of people. reaffirming the $8 billion of savings. there is a big social dynamic to this. there is a real science to it. lisa: how much is this forced marriage possibly a template for other banks in europe or possibly a way to move forward with a very over banked region? manus: a very over banked region. we spent years talking about the cross-border transaction coming. there are 250 banks in this country, by the way. you cherry picking. this is the fact of the day. in geneva, they are going to own

50% of the mortgage market. that is concentration risk. from an industry point of view, this will be one mother a wealth manager. as far as investment banking, if you want to take a risk, go to france. i think -- can i leave you with this? this is the most important moment. they want to go, i'm not done yet. we are coming for you, jamie. we are going to build this brutal beast and go head-to-head with the americans. he once to dust one off for the americans. and they are the jimmy duncan of europe. jonathan: i do not think that ultrahigh with -- i think they have multiple banks.

now, all of a sudden -- perhaps they have others as well. is this good or bad news? manus: i think again, on this very subject, it was just, do not over assume that everything migrate into jv. i would say that there would be pods of entrepreneurial style. i am generous with the flowers this morning. wealth managers within credit suisse that went to go to julius. typically, this waste and the europeans did not migrate to your side of the world. they do not banquet american institutions, so it will be interesting to see where the money flows. it could be a touch of the french and british.

jonathan called the team out of europe have done a phenomenal job. tom: piecing it together, it is a toxic mix. they have had a lot of different beats. jonathan: you cannot be describing our colleagues as toxic. tom: this is not like people going, ubs, what does that stand for? these are people with deep experience. jonathan: where does the money migrate to? >> can the americans gained in this crisis? even gaining in the u.k. jonathan: yields are a little

bit higher. about three basis points higher on a 10 year. ♪ ♪ to guide you through a changing world. ♪

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>> i think the theme that continues from last year to this year is one of uncertainty. what has emerged as the link between rate hikes and a slower economy. >> you throw in the banking crisis or turmoil we have, and now we have another layer of risk to economic growth. >> i don't think the consumer is about to fall off a cliff. >> you expect a slowdown. a substantial slowdown. but you are not expecting that

contraction. >> this is surveillance with tom keene, jonathan ferro, lisa abramowicz. >> slowdown. live from new york, good morning. for our audience worldwide, this is bloomberg surveillance on tv and radio alongside tom keene lisa braun of its. the appetizer before the main event. the main a course on friday. >> the main event is more important that was two weeks ago. all of a sudden, i would suggest, maybe friday, last job state, it's taken on a new importance, and one reason is that is the only jobs report from the meeting. this is the last real substantial look at the labor market. >> is about getting a decent understanding of what the condition of the economy was, going into this banking stress. that is worth pointing out. we have to ask, after the banking stress, how redundant is friday's number #>> that's what was being talked about. the idea that the survey was

shrugging -- sugar and caffeine. it was saying you are seeing the labor market the way that once, but the sugar and caffeine doesn't capture what was already seen, so how much do we trade on data that we are looking at, and potentially doesn't factor in. >> i was walking in down the street, during the edge of spring, and it was so cold, and i was looking at the most important thing. david kelly, j.p. morgan has asset management, looking for non-foreign payroll prints out there. to me, that is the most important thing that the market isn't ready for. >> you have to talk about the calendar. with the cities talking about weakness that doesn't show up to 2024. we mentioned this in the last hour, and it's important. the last 12 months, we spent talking about the interest rate hikes. what about the baking shocks.

how quickly will show up as a part of the economy? it will diffuse against assets, and i don't think it is a 10 point because we have been through this before, but real estate, the land of chris whalen is what we are looking at. in real estate investment, typically to the major regionals and the smaller banks, that is an exposure that is following the banking crisis. >> this comes out a little bit later, but we will go through the data in just a moment. here's the price action for you. if you're just tuning in, equity futures are down .1%. just recovering on the s&p. a day of losses from 4500. the longest streak in january. believe it or not, the market has been choppy for the last month. heels are a little higher in the trends of the last week or so.

yesterday, two-year yields were much lower off the bank of the weekday. his -- this morning, they are higher than five basis points. >> we saw this amid comments from the fed president saying they expect to raise rates above 5% and hold them for a long time. it shows a credibility gap that seems to be opening between the market and what the fed is saying. today, with bloomberg's own michael mckee at 830, you should hear what she has to say. given the market seems to be screaming. how much does he push back? unable to cope point of view, emmanuel macron is traveling to china. we also see that ursula of the european commission is going to be joining him. it's an interesting juxtaposition at a time when the taiwan president is in the united states and is being met i house speaker kevin mccarthy. how much of a unity is there really between u.s. and europe when it comes to discussing and negotiating with china, given

the differentials in reliance, economically, on that nation. we do get adp employment data that no one cares about until they do. is it going to give us more than we got yesterday from that data, and then services coming in for the month of march, 10 a.m.. really curious to see whether we start to put more weight on that. this is a survey that is very messy. it is basically companies throwing darts at a board, saying they need to blanket the fields with attentional applications because we are not getting enough qualified workers. do we get anything from the survey in terms of the trend and some of the harder data russian mark >> thank you for looking ahead to that economic data. thank you also for including micron going to china. the chaos of the last month, the banking system in the united states, i would say the trauma of yesterday, politically new york, there are really important things going on, geopolitically. if china brokered idea, it would

be barely speaking about. after to china, we hardly talked about this that this is an important issue. >> this is a good time to mention this. as a hundred percent correct rated it was just a lot of numbers and stories. a conversation tomorrow john, about just what you said. i will begin with china and i will stand with china because it is the theme of the spring meetings, and onto the october meetings. >> then finland and nato. >> are these the kinds of things that just slip'neath the radar because we are so focused on these hyper divisive issues? in places like new york red the drum of yesterday. >> we did it yesterday, and i am proud of our team for picking up the video we saw from nato as we saw a secretary of state with the leadership of nato raise that blue cross flight, but i am 100% in agreement that this cacophony has to look internationally. >> will catch up on some of that

in a little bit. joining us is the head of investment strategy at blackrock we had wonderful to catch up with you and good to see you as always we all want to know just how much demand there is for treasuries, based on what you are seeing. >> good morning. it's great to be here. a tremendous amount of demand is what i would say. just looking at the flow for the first quarter, of the 74 on million that came in to etf's, about 70% of that was in fixed income. more specifically, what i thought was interesting is that investors gravitated towards the highest quality parts of the fixed income market. we are moving towards government bonds and treasury. then the value. this gives you exposure to the biggest inflow ever. so investors definitely want

fixed income here. they want the highest quality fixed income, and they want treasuries, not great deals, but better than they were about a year ago. >> within crisis, and within your, we need to encourage. what part of the etf world is the courage applying? where should we be able to invest away from our full faith and credit fears. >> you are absolutely right. investors need to stay invested red i think one thing we have learned, especially when we look at the price action in both january is march is that we couldn't necessarily have expected the s&p to be out as much as it was. so where should investors go into slightly volatile environment. we looked at that in our outlook that just came out. number one, think about quality and the equity markets and the fixed income markets. within the equity market, it looks at companies that have

strong cash flows, high origins, and really have the nullity to have strong balance sheets. looking at quality as well as looking at road companies. all growth companies are at a reasonable price. that can be something like an i accent, but it could also be a global energy company like ixc. that is the equity side, and on the fixed income side, you know this. i've talked about this on your show bunch. we think the new regime is one where you should be buying every deal. i think we are in a generational opportunity for investors to get really high quality income in the fixed income market. today's yield levels are not fantastic, and the fed is not going to come to this by the end of the air, but every time we get that, by bonds, by the front end. we get to about 4%. >> certainly, index strategies work very well when you're talking about broad bond

indexes, but is this investing allowing the stock specific type of analysis that your talk about? do you see investors shifting away from equity index strategies as a start to shift towards greater quality? that's a great question. obviously, this is a great month with a great month for q ual. and as we look at broad mutual funds as well as etf, there has been an outflow from mutual funds as such. when it comes to u.s. equities, but i think the crux of your question is, is there a role for active as well as index investing for investors folios? absolutely yes. one of the things i am most passionate about is the fact that investors can add etf's to their portfolios. investors can do that to

generate alpha in a liquid manner in their portfolio. yes, you can have our set -- asset allocations, but there is a role for liquidity and transparency as well. >> i think this is important. you call this a generational opportunity. that implies that maybe it doesn't around. but you have to get it now. but then you said by the front end, i said ok. on the front end, you're not looking at the end for very long. is it once in a generation, or is it going to stick around. >> i think it will stick around, but unfortunately, every time we've seen as soon as yields back off to about the 4% level, we have investors from institutions and pension funds and short companies, as well as retail investors gravitate to the duration. when we do get back up, i think we will most likely get back up, back to 3.7%, one some of this

fear around the banking crisis has dissipated somewhat, so i think it is a generational opportunity when we get back up, but now you should invest in fixed income. i think, allocating to the front end -- it makes a lot of sense. >> enjoying catching up with you. >> the bond market. >> i always love it when everyone says we are waiting for the opportunity to sell off then they never selloff because everyone is looking for the opportunity to continue to buy. >> it speaks of the wall of demand. the caution out there is off the chart. what does it mean for equities? how do you sell them? >> you didn't in quarter one. i believe we are still gloomy. >> we've got to acknowledge this data. you got to acknowledge that. the bond market is trading on that. >> that is new. equities are down.

this is bloomberg. >> keep you up-to-date from news from around the world with first word. donald trump has announced his indictment as politically motivated. he tried to link the case to grievances. he is holding sway over his importers -- supporters. the president spoke after he pled not guilty to 44 counts of falsifying business records. kevin mccarthy called this a rare opportunity. inmate result in renewed military tension. he meets with mccarthy other members of congress at the reagan library in los angeles. china has threatened a nonfat -- unspecified response. voters have elected brandon johnson to be there next mayor. he defeated paul dallas from chicago who made crime the focus of his campaign. both are democrats.

johnson wants to raise taxes on major corporations to boost chicago's revenue. france's president emmanuel macron will be in beijing where he told the french community that china can play a major role in the ukraine. he also said he owes his new student decouple the world's second-largest economy. he has been pushing europe to take a more moderate stance towards china and the u.s.. >> a billion dollars have been paid. the largest maker of health care products will also make a new attempt to contain the liability. within bankruptcy, filed by one of their units, they hope to settle complaints from about 60,000 plaintiffs. global news, powered by 2700 journalists. this is bloomberg. the first time you made a sale online with godaddy

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>> under new york state law, it is a felony to falsifying business records with intent to defraud an intent to conceal another crime. that is exactly what this case is about. >> the only crime i have committed is to fearlessly defend our nation from those who seek to destroy. >> that was the district attorney in manhattan with the former president donald trump responding to his argument against him in remarks last night from mar-a-lago. florida, live from new york city, we are on the program. s&p 500 is shaping up as

follows. equity futures look like this. down six or seven points. about .1%. down .2% on the s&p. yields are higher by a single basis point, maybe even two if you squeeze another one out. on the tenure, two-year, we often talk about what happened at the front end of the curve the relationship between the bond market and equities. data was weaker, the bond market rallied, and that makes sense. then something else made sense. it typically doesn't. the equity market started to weaken as well. >> this is one of the biggest shifts, and if it sticks, it is a tipping point. we had weakened -- weaker economic data which was not the case earlier in the year. is there a question about what it will take for the fed to come in and cut rates or even a hike. what does it mean for the condition of the economy? >> it is bad news. >> we will see how long it sticks. we still get pushback from fed officials saying they are going to raise rates. the market pushes back, and what do we get in terms of how bad

the economic data gets for them to be able to do that in the market. >> we don't have time to dive into this, but is a source of huge debate, and i've never seen the navelgazing of trying to get offended at the rate turn. i've never's observed inflation out there that is sticky at 4%, and we are trying to model the quote of when they cut and pivot. whatever language you want to use it. it is absolutely original in the debate. ask the market doesn't get to wait. the market doesn't get to wait until the next dog called. it has concluded, a lot of people have concluded that these prices are ultimately what are being developed in the last month or so. it is inflationary. it just seems to be reflected in the price action of last month or so. >> that's why the western alliance statement is interesting. we keep going back to the banks because bank stocks are underperforming. it is a departure from some of the recovery trade we've been seeing? they did not give guidance about how many deposits they continue

to see flowing out. this is a question. it is not because of the weakness of the bank, but because of what we are seeing with money moving and banks unwilling or unable to be let. >> we will go to the moment yesterday in manhattan. we are in los angeles, and that could basically be called eastern taipei. eastern taiwan. far across the pacific ocean, taiwan is moving 80,000 people into the nation, into california. it's a huge population. today, there is politics therefore balance balance of power, and we are joined right now. i want to get away from the trump story and go to the mccarthy story here. we are meeting the leader of taiwan, the symbolism is immense, and beijing has noticed. >> the symbolism is immense in that this is historics -- historic.

we never seen that taiwanese leader meet on u.s. soil pretty is the third high-ranking official. what we have heard from the white house is that they are saying there is nothing to see here, basically. taiwanese president sign when is transiting through the visit of other democracies in central america. these meetings. but obviously, everyone has been waiting for this. it is the most controversial, and it is the one that china is watching the most. they are saying they will respond in kind, and there will be consequences, so there is a potential that we could see a little bit of what we saw last summer when speaker pelosi was in taiwan, and that was a massive military drill, firing of rockets, and this will likely be slightly more muted because at the end of the day, it is taking place on u.s. soil. >> it is 6800 miles from taipei to los angeles. it is a hundred miles across the street. what is the new military presence in backing mr.

mccarthy's meeting with mr. side. >> there is a huge chinese military presence there. we know that. they wanted that on full display during speaker pelosi's visit when it comes to the united states. you've been following the tea leaves of what might -- lloyd austin has been up to, he made a trip to the philippines, and in his recent report, they were fortifying military bases in the philippines. this was a new military posture in the pacific. >> the taiwanese president kevin mccarthy was meeting her. at the same time, and -- emmanuel macron another representative's were heading to beijing to negotiate more closely with xi jinping. is this problematic, indicating some fissure between the two powers? >> is an interesting split

screen as you can see because china says there will be consequences. they also met with speaker mccarthy. they are represented in new york. they've also met with i partisan senators. this is about taiwanese security. there is a bill circulating in congress about standing with taiwan. being able to send sanctions and china crossed a line in did in fact invade taiwan at the same time. there is not just emmanuel macron, but you can see the administration has been trying to get european leaders on board with how it shows that there is

not just the u.s., but the entire world as well. >> on balance of power. it will be exciting. and with the international affairs, the number of not major, but separate stories in 20 plus years, i've never seen. including core coverage. >> what you are leading towards, they were talking about consequences. what are the consequences. xi jinping will overreact to the taiwanese president and the u.s.. it is not something in the forefront. difficult to know how you de-escalate from here.

if you think about hanging out in the back, tiktok has a potential ban. how do you play some of the business interest that the u.s. has over in china. with easing priest ratcheting up of tensions, i don't know how we get back down from this given it is bipartisan. >> in finland, we were talking about the party congress, the anointing of xi jinping as a lifetime leader of politics. and now the micro testing, every day, every week, every month of the west. many micro tests of what is the new china owing look like moving forward and you see that in the stew of visits and meetings, including what were going to see next week read >> what are we going to see with tiktok? >> they've all got together. >> i'm not up to speed on this. full disclosure. i want to get rid of it. that's my dad kind of thing. >> you think it should go. attribute. -- thatcher view.

-- that's your view. >> lisa is more up to speed on this. instagram is changed. facebook has changed. they are all changing reaction to tiktok. we ban it? i think that's delusional. >> if you force a sale, what's the repercussion china? i don't have any visibility in terms of apple in terms of the businesses. yeah right. exactly. they can't. it's not there. what do you do with apple and the other big tech companies that do a lot of business in china? >> thank you. equity futures on the s&p -- s&p. this is bloomberg.

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>> equities are down yesterday. softer this morning. it down .1%. good morning. water market shaping up as follows. equities are down on the s&p and nasdaq. were down .1% on the nasdaq 100. if you look at the bond market, .2% shaping up as follows. a two-year with 384 point 79. a couple of basis points. started at 4.1%. act off of weak data. job openings, factory orders, another russian lady -- later. looking forward to that in the

10 year. just 335. deutsche bank talking about the euro zone exceptionalism for the right reasons. for a long time, we talked about euro zone exceptionalism for the wrong reasons, now it's about europe, and why we should pay attention to the labor market data in the european economy. >> european wage gains are outpacing the u.s. for the first time in more than one decade. just to give you a sense of how unusual this is, and he is not alone in saying europe holds more growth in the united states. >> another 50 from the ecb. >> when we start talking about the extra 50 causing slower growth going forward in the ecb? that is basically what you are asking in london. how much are we going to see the ecb hiking more than the federal reserve. i want to look at stocks which are important to keep track of. we should talk about banks. going to do that again. western alliance gave earnings, and what they didn't give is what is spooking the market.

they failed to give an explicit deposit balance, and people are wondering what they are hiding. shares are down 4.6%, and it speaks not to a lack of confidence and smaller banks, but a lack of flow into them at a time where you can get yield elsewhere. what does that mean for lending. it was really struggling in the face of the jitters from .8%. in sympathy. nvidia is really interesting to watch because you saw japan join with the west to ban certain chipmaking supplies into china, and you could see what was going on with nvidia. the shares were down 1.7%. but we are not done yet with the trade work. we are not done with the ratcheting up, the escalation with respect to certain issues versus china. this is one of the most underplayed stories of the year, and i going back to this, especially given that on the geopolitical scale, that is the imf, that is what all of them will be talking about.

>> next week is huge. it brought this up on the banking side. next week, the first republic earnings on the 15th, and on the 14th, jp morgan. we will have cpi as well. i might go as far as saying maybe the banks will be more important than the payroll. there will be a sense that a lot of people who come on this program believe that the economic data is stated, and it is about getting a decent picture of the economy going into the banking stress. we can get up picture of what the banking stressful due to the economy. >> the condition of the economy gets the bank right sided straightforward, and to see what corporations will do, as you mention. kicking off burning. maybe federal express is getting out from this. moments ago, i've got a reason for the dividend. this is all hell breaking loose

in a blue-chip company. they adapt to the new world. >> do i sense sarcasm? >> this is what i've been talking about, which is corporations with a vengeance adapting to the cards they are dealt, and the things we talk about back and forth every day on surveillance. >> the stock is up 3% in the premarket. >> we've got a wonderful guest with us. we are going to dive in these details and get back to you with a full report in moments. we're joined right now from a senior portfolio manager for global debt and invesco. we will detail these two stories, and my question is that all you see on invesco, what is the level of flight quality now. is it flight quality in april, are we all going to react, including federal express? >> i have -- i think there is a concern in the banking crisis story that took over the market in march. we take a step back, the macro underneath has not changed as much.

what's driving the fed, we obviously have to see with specifics, but what is the tightening that comes as a result. that will be a slow go, and not something we get hints of from the tones of jamie dimon and his letter yesterday. things with an earnings. you won't have the nitty-gritty data, that will take a wild, so we are left with looking at our data that we have, and wondering if it can slow. from a ray perspective, as you talk about this morning, do we think treasuries themselves are super attract? 30's. the curve is inverted. not really, but cds, you can get cds at 5%, and you can have some of these bank accounts at smaller banks if you have a level of comfort in the fbi see, and they've certain given more of that to the market for 5% as well. there is that level of flight quality, but i think the broader panic in the market has come back a bit. >> if we begin with the idea

that we are not returning to the low rate regime, whatever that timeline is, we go to something new. we will not go to what i remember of my youth, but it is something different which is a normalized high rate regime. how strategic to someone scared stiff play this event? >> i think we are in a different world. i think it is hard to see. we've shrunk the tail on both sides. even coming into this year in january, there was a concern of maybe there is a fed that could go to six or 7% what does that mean? do you have a market collapse as a result? i think we framed and that is what it has done. at the same time, is hard to see us going back to the zero lower bound because we are in a higher inflation environment. we are navigating the middle. as investors, we get used to what our options are. what are the risk-free assets? to become more interesting because they are not at the

lower end. europe is finally more interesting read the government bond world and europe becomes more interesting as a fact of not being in negative deals for the first time in years. for the home-based investors in central banks and whatnot. >> in the federal reserve, how much information will we need to make a decision? >> again, not as much as they would like. i think from the banking side, and the central bank, what we got from the policy meetings in march, there is an effort to compartmentalize the two issues and say we have inflation as a problem. we have policy rates to address that. we have systemic issues, and we have other special tools in europe. we have treasury and the fed and fdic all these things. i think that messaging from the ecb is a little clear and crisp then from powell.

i think to get the information in the u.s., especially with what credit tightening has actually impacted the market, from the banks, it is just going to take time, and we don't have hard data. i think the fed continues to pound the table that they are concerned about inflation. they do not have tools if inflation -- they are more concerned about letting inflation get out of control, so it is a measure like 50 is not on the table. but should they or would they likely go to 25, that is the case, and from there, it is the data. payroll is less important. but, the market still looks like a 200 plus number. the economy will stay at a steady pace. 75. you are still talking about running much above what the economy needs a flat rate. >> with the move friday, to christina's point, the fed

totally blurred the lines between financial issues in the monetary policy object is with the financial issues as a substitute some extent. the rate hikes. >> reflecting on that, and the projections, coming down 50 basis points with the median., that raises a question as an investor. if you are saying, though cds look pretty good. not with a bond investor, but at what point can you go into riskier credit at a time when perhaps, people are miss pricing treasuries, and where it will go, and given there is not been something priced in, what would it take to bring down inflation? >> i think there are two sentences. the market likes to talk about where the fed pricing is, and this is the direct path that the market is pricing. we look at it more as the market pricing is bimodal. we have a scenario where the fed in fact stays on hold, close to the levels they are for some. of time. and we think that is a higher probability event.

then there is the tail on the other side. things do break, and they have to cut meaningfully, and that is not that they may have to cut 200 or 400 basis points similar to 01, so is our base case that they cut the 85 basis points that are priced into the market currently? that is not a base case. that is the tail, and that is the divergence of how the market things about it. you think about something else. >> you are sitting next to me and you are allowed to forget what was said. if you're sitting next to me. >> you make up your own questions. don't worry about it. >> but that is the push and pull of where we go from here. the path. from an inflation perspective, inflation is running high. i think inflation bonds look interesting still, and we have the against -- where we said this before, and 2022, it's a your clear duration trade where

2023 remains the primary market. that will be in the transition mechanism of the divergence of central bank policy and what is the most interesting. ask when you underpinning -- we underpin that, you talk about the importance of the property market. commercial real estate is part of that for you. can you build a story off the back of what we think will happen with commercial real say? >> it impacts it for sure. there is a different level of importance in the markets. but i think, in the consumer in the u.s., the consumer central arch of the market, and housing, i was listening to one of the podcasts, and how the homeowners had the biggest political contingent lobby, and it is true. you have the housing markets, so i think the story for the u.k. and canada remains anchored in divergences between the markets. particularly in the u.k.. they deemphasized the market and say they feel rich based on how

expensive the house is worse -- house is worth. that is what i run my wealth from. >> that is why the recent decline in home prices in the u.k. is so interesting. how much does that actually act as a tightening much market that is a rate hike by the bank of england. >> confidence issues. that is the point. >> massive confidence issues. thank you. pray to talk to as always. back to the real estate thing. >> yes. i think there is any number of way to go here on the real estate thing, and is something we have to follow, city by city. they are making the headlines. >> will get some data for you. then at 830, we will have mike mckee. coming up in the next hour.

>> keep you up-to-date with news from around the world. this is the first word. i'm lisa mateo. in the campaign stage in florida, we have a comeback bid at the forefront after pleading not guilty to 34 counts of ultrafine business records in manhattan red the former president spoke to a crowd of supporters at is mar-a-lago resort in palm beach where he called the indictment politically motivated. in wisconsin, democrats have a majority one on the supreme court for the first time in 15 years. it comes as justices will consider a case that could determine access to abortion. the two candidates in the race spent $28 million making it the most expensive state supreme court case in u.s. history. the president volodymyr zelenskyy is visiting poland for one of the strongest allies. he is discussing defense and economic cooperation. you will sign a deal on supplies, including armored personnel carriers. the chairman: powell says the

integration of credit suisse will take three to four years. that doesn't include the wind down of the investment bank. they are speaking at ubs's annual general meeting. he says that even with protection in the former swiss government support, there is a huge amount of risk in the deal. the new study says that americans are spending less time working than they did before the pandemic. some are spending more time on leisure activities, and that was a shortfall of labor. it is the equivalent of two point 4 million employees. that adds pressure in a hot labor market that the fed wants to cool off as if ice inflation. global news, powered by or than 2700 journalists and analysts in more than 120 countries i'm lisa mateo. this is bloomberg.

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>> it is more than an obligation to follow the law. donald trump has been a serial violator of obligations, the

idea of norms and the peaceful transfer of political power. obligation something that citizens have to insist upon, and that brings it back to the law has a system to deal with this. >> the council on foreign relations. the president joining us in the last day or so from new york city. let's check on the market. equities are down 1% on the equity 500. fedex a consolidating operant company raising the dividends. going up 10%. stocks are higher in early trading. >> this is a great zombie roll up in -- and part of that is that winners and losers are looking at the facts. it is a hugely important symbol of the logistics of america, and that is fred smith. the new leadership is saying, let's go and take three units. squeeze into one to do ever better. they will take the costs out of that, they will give a knife -- nice dividend leap.

>> excelled in cost cuts. but this will enable them to do that. a little later on, we have data in 30 minutes, and the only report, which we report -- refer to as an appetizer before payrolls on friday. lisa set of pace through this. people say you can ignore that, and they end up trading on it anyways. we will see what we get in a little while. at 8:30 a.m., another programming no, retta messed with the cleveland fed. staying there for a three-year route. the fed has been pretty clear about this. they have moved to some extent. >> yes. >> there is a substitute for hikes but they don't want to cut and they want to stick with where they are. >> they are each different. look from cleveland to st. louis is not just the cardinals and the indians look good this year. these are some real distinctions between st. louis and cleveland. but they are pretty much on the same page of what susan collins of boston told mike mckee. we are data-dependent and get

over it. >> the last meeting was too soon to make a call, ultimately, on how much the tightening needs -- means for rate hikes. it is a substitute with a dot plot unchanged, and they're going to leave therefrom or, but there is something implied in that. ultimately, it is too soon, and we have been asking a question. is may 3 early enough? we are told, maybe it is too early. >> the one thing people keep saying is that the fed is more concerned about not going hard enough and inflation going out of control over the decline in the economy. >> we need to see vectors come down. service sectors with goods clearly showing disinflation. i am going to cut them some slack. you are more critical about the pacing and dialogue. to me, the uncertainty right now is off the chart. it is literally off the chart. the uncertainty in washington is off the chart as well. we have huge responses to the

attendance of bloomberg surveillance from a few days ago. michael's eldin is a former federal prosecutor. at america university, and washington college of law, barely described as a commitment. not only as a prosecution law, but to explain on tv. he is one of those people that comes on and is crystal clear. lesko law 101. we did not see misdemeanors yesterday. all of the headlines today speak of felony. explain the distinction from the former president of misdemeanor versus felony charges. >> a misdemeanor is less serious than a felony. in this case, the misdemeanors would have been the mere entry of false data on the books and records of the business, but they cannot directly charge that because it has a two-year statute of limitations, and this occurred longer than two years ago. had to figure out a way to make those misdemeanor business

records all statements into felonies. what they did was they said that misdemeanor was taken for the purpose of promoting another crime. in this case, hiding in the people of new york, the true intent of what trump was doing which they alleged was to deprive people of information that would have been relevant to their decision of who to vote for, specifically in three people, stormy mcdaniels, mcdougall, and a doorman. money to suppress their stories. there making sure the public wouldn't know what trump was up to in the misogynistic way prior to this. it was an interesting theory, we will see how it plays out in practice. >> we could talk for an hour about nuance. i will go to what i witnessed yesterday, and the silliness of microanalysis non-pros like you of who held the door for who? did you see a normal process

yesterday? doesn't matter that we are analyzing who is holding the door for a given defender? >> not at all. in fact, for a few minutes, i turned on the television, and i heard a comment as well. they really are struggling to fill airtime because they expected this arraignment to take place more quickly than it did did that had nothing to do with anything of substance. the only thing that mattered was donald trump was charged with 34 felonies. he pled not guilty. they said next court appearance in december, and between now and then, there will be a whole host of motions from trump's lawyers to try to change the venue of this case, and order a dismissal on various legal theories. that is what is going to play out between now and december. >> let's go to the media circus. as a former federal prosecutor, how much you have to factor in the prosecution and how you

prosecuted, given a lot of interest in a given case? >> you have to be careful about that. a lot of defendants are entitled to a fair trial, and you don't want to poison the possibility of that through a media circus. prosecutors have been very circumspect about how to proceed. they are going to try and rein in their witnesses, particularly michael cohen who is an ever present presence which i find surprising, but i think the biggest problem will be can donald trump follow the admonition of the judge to try and temper his commentary on the case and yesterday, he seemed to ignore what the judge said on day one. >> as you see, how this is playing out, politically with the republican party coalescing behind the former president, do you think this case was a mistake by alvin bragg? >> it depends but we mean by mistake.

this is a mistake to be the first case if there are going to be other cases against all trump? yes. it is not the strongest case. if you think what about accountability? the president did all of the activities charged in this indictment while he was a private citizen, before he was even elected president. most people in that circumstance would be charged with this crime. when you ask your guests as they come on for future segments, this morning, if they were in this business and they entered falsely these types of records, what they fear being charged? of course. nobody would get away with that sort of is this crime in manhattan. it's accountability versus political strength of the media. courts and public perception. i go with accountability. >> what you described was the legal art of turning a

misdemeanor into a felony from ada that likes to turn felonies into misdemeanors. is that not somewhat concerning to you? >> you know, i got a direct message from a friend of mine saying she wished that he would be as tough on other types of crimes as he appears to be on donald trump, and this type of crime. i guess the point is fair enough, but, it seems to me that if you believe what the president did or candidate did in order to win the presidency was a crime, then you bring that crime and you bring it for all it is worth, which is a felony charge. >> thank you for being with us. great stuff as always. michael is from the university of washington college. >> i love talking to prosecutors. a number of other networks here had brilliant people yesterday, and you get a concision of thought there. i thought someone watching. mason when i was 12 years old,

and my mother would explain why della reese was -- i am a complete amateur. lee says better at this that i am. >> a lot of people have pretended to be lawyers in the last couple of days. and they are asking questions. i am confused by this. it does make sense to me. i'm totally is the same page as everyone who thinks that everyone should be treated the same, without a doubt, and you know the way i feel about the way senators and people in the office and american put a clean institutions are treated in this country. i think they get far too much deference from general public and the media and etc.. we've covered that, but when it comes to this, this doesn't feel like it is consistent, based on the da's approach to crime. >> hasn't been particularly harsh with other types of crime. he has criticism for that. this has to go to prosecutorial discretion, which is an art and out of science, and something that people usually are not steeped in. >> well said. as always. equity futures are down .1%. joe quinlan from bank of america is going to be joining us shortly.

the bond market is 333. i've just got site of loretta mester from the cleveland fed. just out of the corner of my eye. she will be with us in 30 minutes.

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>> the slowing inflation

scenario you have in the u.s. gives the fed the chance just low their rate hikes. -- the chance to slow their rate hikes. >> the markets are not believing what the fed is saying. >> just as we were in unprecedented warriors for not hiking in '21, they are in unprecedented waters for not -- waters for not hiking in '21, they are in unprecedented waters for not loosening right now. jonathan: markets on -- tom: markets on the move. the two year yield plunged to a 3.80 handle. jonathan: we are down about two basis points down on the two-year after being high by five basis points. lisa, keep it together. lisa: plunged!

jonathan: when you look at ism for manufacturers, we started the week at 4.1%. now the two year yield is at 3.81%. tom: on the basis of back to that 4.1%, it is a 9% move in yield. i take your point that we have not broken through support. the volatility is so great i need to see a 3.55% to begin to get stressful. that is how bad the volatility overlay is. jonathan: the adp will report in 13 minutes time. than it is onto the ism services read later. then it is over the claims, payrolls on friday. tom: someone in europe today

was talking about the wage spiral in europe. maybe we get wage indication that dovetails into what mckee looks like, which is that service sector measure of inflation. jonathan: things have changed. we have got that banking stress. it will lead to tighter lending standards which will lead to softer growth. that will be the pushback we get on friday. but next week on friday we get the cpm report. tom: the issuance within the real estate market has -- dovetailing your bond market expertise into the greater economy, there is a post banking crisis tension right now. lisa: it is not just because of weakness and banks. it is because of the flow of money into money market accounts. what you have seen as a softening in wages in the u.s.. if you look at the wage growth

tracker the atlanta fed has, opt switchers are not getting as big a pop in their wages. -- job switchers are not getting as big a pop in their wages. tom: stagflation is there. the one thing i will look at is the 10 year real yield. let's call it a grind, it is not a plunge. it is grinding ever lower. i don't think the street is set up for an inflation- adjusted yield. jonathan: we will get some data on friday, some data next week. it is far too early for the fed to sit there in early may and make the call that they know what is going to happen. for how long will we ignore the disinflationary information? lisa: they are starting to wake

up to that. at some point that may actually force the hand of the federal reserve. tom: brent crude, 86 level down to 84.87. jonathan: yields are unchanged on the 10 year. yields or higher going into the adp report. the adp report is about 11 minutes away. the adp report, as lisa has said reportedly today, no one cares about it until they do. tom: i care about it because they handle the paychecks of america. the new study they have is a little more granular and a little more authentic about what those pieces of paper are doing. joseph quinlan with decades of experience in the ups and downs of the markets. joe, i have to go to the news on fedex today.

you and i have seen this before where one company splits into three and it 10 years later they combined to keep everyone busy. will we seem more companies adapting to the post-pandemic world by strategic changes simply to reduce expenses? joseph: i think they have to, tom given the fact we are getting more protectionism from the united states. companies are rethinking how they are operating not just in north america, but europe and asia. the key -- what we do not know is how costly this is going to be and how long it will take. where do productivity gains come in? tom: your hallmark is -- i think of gina martin adams at bloomberg intelligence, same thing. you have to be in the market. you have to participate.

i am scared stiff. how do i participate right now? joseph: you can be scared and participate. stan the market, that is what we are telling -- stay in the market, that is what we are telling our clients. you want to own companies in sectors that are expanding. look at the fit, health care -- fed, health care. you can sleep at night and work your way through this choppy turn in the markets. being high quality, big companies where there are growth in these underlying sectors. lisa: a lot of people are talking about the divergence between bonds and stocks. stocks are saying things are just fine. things will keep grinding along. good news is good news and bad news could also be good news. we are seeing stocks awaken to

possible bust. do you think that will continue with stocks coming to the bond'' side? joseph: we will know shortly with the earnings season. it will be important to know how the companies are coming to the market, what happened. the earnings reset can bring it back down to earth, so to speak. lisa: this is what mike wilson is talking about over at morgan stanley. they said this in december as well, and then we got an earnings season that was not as great. why was it not enough then and because they see it -- then to cause a selloff, but it will be enough this season? joseph: shares are still too high. they have to come down. we are begrudging -- begrudgingly we have to bring down the earnings estimate,

which helps set us up for '24. i think the market will start pricing in better news for '24. we are not there yet. tom: as jon ferro just mentioned we have x number of fed meetings to move away from uncertainty defined clarity. where is the quinlan clarity meter? joseph: i don't know if that is ever going to come, tom! we have to see what different weeks' outlook looks like. we needed confirmation are wages actually coming down? his inflation tracking lower? we are still -- is inflation tracking lower? we are still a couple months out. the fed is on the correct path, and there are no hiccups. we are not there yet.

by summer we will have clarity heading into '24 and that will be key for the markets. jonathan: morgan stanley said there is little evidence that able market has begun. what evidence would uc -- a bull market has begun. what evidence would you see for a bull market. joseph: i would wait for the whites of the eyes of the recession. we are tracking for growth first quarter, say 1.7. if you could tell me q2 and q3 are in negative territory, i would become more bullish. jonathan: i appreciate the clarity. on the latest, it is so weird still lisa to see -- lisa: i would agree, which makes

both people get lumped into the same category. they are always a bear or always a bull. i think it indicates a consolidation of views around this bearish tilt. jonathan: you would wait monday, tuesday time and then get the bullish side of things from marco. that has changed. they are on the same page. marco said they expect a reversal in sentiment. tom: lisa did surrogate ferro here when you were out with the plague end lisa featured marco's work. if ever someone says, "tom, you are so smart, " just to lean over and say "tom, brazil!" i got brazil so wrong. we are out of a pandemic. richard wrote a brilliant essay

in the economist and said it is all about and original supply-side shock that marco and mike and joe quinlan are still dealing with. jonathan: i will cut them some slack too. it is a very difficult job to do. i struggled to cut slack for shops and houses to get it wrong, and then not offer you any clarity about what went wrong. tom: hugely correct! the major thing is you have to learn from when you are wrong. lisa: and explain the reasoning that led to it, and how your reasoning has either shifted or doubled down. jonathan: we have got that from one bank. not the other. just gonna leave that there. cleveland fed president mester will join us in 18 minutes time.

lisa m.: donald trump has announced his indictment in new york as -- denounced his indictment in new york as political. the former president spoke at his estate in florida hours after he pleaded not guilty to 34 counts of falsifying business records. taiwan calls their president's meeting with kevin mccarthy a rare opportunity. it could lead to renewed military tension around the island. the president of taiwan meets with kevin mccarthy today. china has threatened an unspecified response. voters in chicago have elected to brandon to be there mayor. beaux-arts democrats. johnson want -- have elected brandon johnson to be their may

or, beating vallas. both are democrats, u.s. mortgage rates have fallen to 6.4%, the lowest in weeks. a still mortgage applications to buy a house have decreased. fedex has consolidated their opportunities into one operation to save money. they believe combining fedex companies can save $4 billion. it is also raising its dividend by 10%. global news, powered by 1200 journalistss in more

jonathan: downside surprise, michael mckee what have you got? michael: we were significantly below the forecast for 210,000 and last month's number has been revised up to 261. remember that payrolls number four last month was -- for last month was 211. it is a jump point from here to the payrolls numbers. i think the sim employment -- ism employment numbers will be more important this morning. it is interesting, construction jobs are up 83,000. construction was dead and housing was dead. they record a lot of lost jobs,

30,000 -- they record a lot of lost jobs, 30,000 in manufacturing. tom: the construction lift is all working on jon's remodeling of his kitchen. jonathan: they could be! >> leisure and hospitality are up, which will be interesting to see again on friday. tom: can i interrupt to ask a question i think is really important? jonathan: just interrupt anyway! tom: you are an expert on this. the two year yield cratered 2 minutes ago and now we are even lower. did adp leak? >> i don't think it necessarily did, but we have got so many cross currents these days. tom: asking for a friend. jonathan: i wasn't here-- i was here with you, what would i know? >> i was on yesterday as the

jolts data was out. jonathan: i want to pick up on the price action briefly. the two year yield was high this morning. it is now lower by 5 or six basis points. on the s&p 500, a little lower, down a 10th of 1%, but the story here is weak data, or at least a downside to price after a downside to price for most of this week pushing through to a lower two year yield. lisa a.: the question mike and pleasantly brought up is, is the market trading off a conviction they used the data to justify and they pick the weaker parts of the data and not the stronger ones. we are seeing two year yields slightly softer off the back of yesterday's jolts data. the number of quits going up -- >> that is what really got to

me! the data is old, but americans were still confident in their job prospectss. here is a bit of data out of the adp. they do pay numbers for jobs. job switchers saw a 14.2% increase in their incomes in the month of march. that is on an annualized basis. adp still finds wage pressures out there. jonathan: mike, i think you can speak to this -- this data is about understanding the condition of the economy going into the banking stress. a lot of people are willing to ignore any sign of resilience and embrace signs of weakness. they believe that is where we are going. michael: that is why it will be interesting to see what happens on friday with the jobs numbers. if jobs numbers are strong will

it create a wall street re-think? it won't create a fed re-think. tom will explain that to you. tom: a curse at about 12:10 midnight. michael: if i asked her, "have you made up your mind?" i'm sure she would say, "we are waiting on the data." tom: the insight i have had in this hugely uncertain blur and your great work with the federal reserve of boston, st. louis -- i was watching the cardinals, looking behind home plate to see you! michael: you are the only one who can sit in those seats. yo areu working these smart people. what stood out to me was kelly at j.p. morgan saying we will see negative payrolls. how does loretta mester's world

change if we get one to three months of negative payrolls somewhere out there? michael: i don't see that happening in the short term, but if it did happen we would definitely be having a conversation about rate cuts. if you are seeing jobs lost significantly, it would tell you the economy is in recession. lisa a.: this is really important that people believe is all backward looking and it sets the stage for where we are heading because of tighter lending conditions. is that how fed officials look at it? the -- michael: they're looking at all kinds of data. there are more timely private-sector data sets they are looking at these days. the government has incorporated some of those into the bla and

bls numbers that come out, but they know they are looking backwards so they have to extrapolate looking forward. the big numbers, the ism services core housing that is in the conference board's index of the lagging indicators. while it is an important number for them, it is not something that is timely for them. jonathan: there has been a believe for much of the last year that doing too much out way -- that doing too little outweighed the risk of doing too much. now does doing too much outweigh the risk of doing too little? michael: the balance of risks is finally balanced at this point. we don't know and they don't know whether we will see a significant tightening in

credit, because it had already happened. the last senior loan officer survey showed 43% of the banks had tightened their credit standards. they need to go much further, or was this about a couple of banks who had management problems? jonathan: in a we -- they are in the risk management business. if you do not know is that a prudent course of action if, you do not have sufficient information to pause? 28? -- to wait? michael: jim bullard wants to 6%, but most are in the 5.1% camp, which would be one more move. their modeling has told then that is probably where they need to be. the fed has always raised the fed funds rate above the level of inflation, when we have had a situation where they try to bring inflation down, and they

have just gotten even with it if you look at the pce numbers. one more move would make them more restrictive. at that point they would probably start thinking about a pause. jonathan: fed funds alone does not tell you about how tight things are because now it is fed funds plus banking stress. michael: it is something you have to add into the discussion, because the fed is looking at the cumulative effect of all of the rate increases they have done. companies do not decide to invest in a plant or software every day, so it takes time for all of those decisions to plan to the economy. sometime starting in the second half of this year, the feeling is we will see all of that hit, and if we see tightening credit conditions on top of that, it makes it more difficult to see strengthen the economy going forward. jonathan: you know how i feel about your interviews with the federal reserve, second to none.

michael mckee sitting down with the cleverly -- cleveland fed president, loretta mester. "the economy is guilty until proven innocent in the eyes of investors." lisa a.: my question is, we keep talking about the fed being more concerned about inflation. when do they start getting more concerned about the fact that unemployment can take on a life of its own? coming up on the open, matt miss ken, andrew solomon, and marilyn watson of blackrock. this is bloomberg. it is good to be back. ♪

tom: bloomberg surveillance, lisa abramowicz, jonathan ferro and tom keene. markets are on the move off adp data. they moved earlier and moved more on a weaker statistic. a two year yield blowing through the recent support. technically it is 3.76% on the two year yield. i would suggest in the recent weeks and months, this is new territory. lisa a.: it is the lowest

if it were to close here for years. tom: everyone will get out there newtonian calculus today to look at that two year yield. michael mckee and i really do not do that. someone that can go to logs and look at the rates of change of our economy is loretta mester of the cleveland fed. she is definitive in mathematics out of columbia and joins michael mckee at our headquarters. michael: we would like to welcome cleveland fed president loretta mester to our viewers and listeners worldwide. you are the math expert. you look at the adp numbers -- we might as well start with that -- there are questions about their methodology, but what do you take away? loretta: we have to look at all the data. that is a data point we will

look at. we will get a report on friday. there's a lot of data coming in. qw will use that -- we will use that to assess where the economy has been and where the economy is going. michael: that was on of the questions they were just asking me in the surveillance studio -- how do you know what you are looking for when the data are in the rearview mirror? loretta: the data in the rearview mirror is important because it tells you something about where the economy is going. you do not throw that data away, but you also have to do a lot of other reconnaissance. the nice thing about having federal reserve banks across the country is we can talk about labor market contacts or business contacts to find out what is happening on the ground at the moment. that information, anecdotal information is helpful as well.

we do surveys and more timely information. all of that goes into formulating monetary policy. i think it is wrong to think "we are looking only in the rearview mirror at data that is from a month ago or two months ago." that data is helpful for looking at trends, and we augment that with other data about what is happening on the ground on main street. michael: what is happening on main street? in general, what are you hearing and what are you hearing from bankers in your district about credit quality? michael: credit quality is still fine. bankers tell us that is still a fine. it may have ticked up a a thaad but it is still low by historical standards. bankers have struggled with deposit storing, tensions in the

banking, industry but that has stabilized since then. in terms of credit standards, they had already been tightening credit standards as interest rates went up so they are continuing to do that. they are continuing to monitor their customers. they are continuing to monitor going forward i terms of making sure they are 00 forward in terms of making -- forward in terms of making sure they are -- they're worried about the economy in general so they are being a little defensive now. some pull in some of their investment spending, but it does not feel like everyone thinks that we will have a deep recession. they are trying to be more cautious so they are more prepared for whatever happens in the economy in the future. michael: the recession argument

a lot of people are making depends on the idea that the full weight of all of the cumulative weight of your rate increases have not hit the economy yet. throw in tightening of credit standards more, are you worried for the second half of the year? loretta: growth this year will be well below trend, and you are right the banking tensions -- typically when you see that happening, you see banks pullback on their credit standards and tighten their credit standards. we do not know right now either the duration of those, if that is from what happened in march or how strong those will be. we expect that to happen, but we are in the time where we are assessing, talking to the bankers, looking at things like the sluice to get an idea of where bankers are.

before the march tensions in the banking industry, the banks were pulling back and tightening credit standards. that is the norm of slow monetary policiy tightening. that is one of the ways it gets pushed out. that is what we are intending in terms of making sure we can slow down demand so we can get a better balance between demand and supply and reduced price pressures. now we are assessing whether the tensions in the banking industry have augmented that. that is what part of the evaluation will be as we calibrate monetary policy. michael: they are calibrating recession right now. you're going to be cutting rates 4 times by next january. how do process that view versus yours? loretta: we have seen periods

where the market has one view of what will happen in the economy, and the fed has another view. we take information from that. we see what they are doing and we say "th is there viewat." we have our own forecasts. if you look at those we did say growth this year was going to be very much below trend growth. we see things a little bit differently in terms of what the appropriate monetary policy is, given where the economy is and where it is going. we are focused on inflation and making sure that inflation gets back down to 2% over time. is the idea of -- michael: is the idea of for rate cuts in the next year crazy. loretta: we will have to go higher from where we are, a little bit more and hold there for some time in order to make sure that inflation is on that

sustainable downward path to 2%. that does not mean we will continue to raise rates until inflation gets back to 2%. we will be calibrating to see when inflation will move down. my own forecast is that it will take some time for inflation to get back down, but i think we will make some appreciable progress this year and then continue to make progress next year. michael: what is your trajectory for inflation? when could we end the year and how fast will we get there? loretta: i am three poin -- i am 3.75% this year. i think that is good progress. we have been that high inflation, well over 2% for quite some time and that is why it is imperative that we continue to make progress and continue on this path. we will be judicious about it.

we will not throw the baby out with the bathwater, as they say. we we'll make sure we are making good decisions along the way, but it is crucial we get inflation back down in a timely way to 2%. michael: the old adage is tighten until something breaks. what would you say that the risk is between something breaking on the growth side and inflation? michael: i a hope -- loretta: i hope we will not tighten until something breakss. i think we have to be judicious about it and calibrate our policy in the right way. we has made a lot of progress in terms of where we started when we started raising rates. we were at zero and we have come a long way. we are making progress. my own view is that we will have to go a little further, but we are well on the way where we need to get to, and then we hold for a while.

yes, we can recalibrate our policy if the economy evolves differently than we are anticipating. that is the nature of monetary policymaking. you want to take all the, information and set a policy path consistent with getting back to full employment, maximum employment and price stability, and if the economy evolves differently, than you may have to adjust your policy path. you need to be open to that, especially in a situation like this where there is high uncertainty. there was high uncertainty in the economy before. we had tensions in the banking system. the stresses in those banks has added more uncertainty, so you have to be willing to take in more information, look at it and reassess if need be in terms of where policy needs to go to. michael: you said we should do a little more. the consensus was 5.1%, which

would be one more rate move. or you and the group that was above that? loretta: i see a little more inflation pressures than the scp. i probably am a little bit higher than the median dotk but am open to making sure we are setting policy to get inflation back down to. 2%. w3ee i'm willing to -- we have made a lot of progress. we all have to go above 5%, but precisely how much and precisely how long it has to stay above, we have to be open to allowing the economy to tell us. michael: is a rate increase a certainty locked in at this point? loretta: too soon. i heard the promo. we have a lot more data to get

to. we will see as we get there what is happening in the economy. the economy will tell us where it wants us to get to. michael: loretta mester says i'm right and that is a good place to stop the interview! thank you for joining us in new york and we will look on may 3 to see if i am still right! tom: thank you so much. we are in our studios looking at markets on the move off that adp report. my major take away their, i heard elements of drugging as loretta mester competently looked out to 2025, a longer timeline. we are watching the bond markets. stay with us, this is bloomberg. ♪ lisa m. donald: trump put his

come back did to the white house -- bid for the white house at the forefront. the former president spoke to a group of supporters in mar-a-lago where he called the indictment politically motivated. in wisconsin democrats have won a majority on the supreme court for the first time in 15 years. it comes as justices debated case that could impact abortion. it was the most expensive state supreme court case in u.s. history. sylvia bellus goni -- berlusconi has been hospitalized in extreme care. he bills a media empire. he served four times as italy's prime minister. amazon is betting on -- walmart

is betting on warehouse robots. they say costs will drop as a result of robots getting packages to customers faster. ubs chairman says that the integration of credit suisse will take 4 years. he his speaking today. he says even with protections there is an amount of risk in that deal. global news, powered by more than 2700 journalists and analysts in 120 countries, i'm lisa mateo and this is bloomberg. ♪

loretta: in terms of the businesses themselves, they are

preparing for some slowdown in the economy, that a lot of the firms are still's telling us their conditions are great. tom: the president of the cleveland fed there. i cannot tell you the pleasure i have listening to loretta mester. just a huge clarity there. before we get to our esteemed guest here following on from michael mckee's conversation, claudia sahm will be with us in a moment. there was a droghi-esque moment there where she stretched out her timeline to 2025. lisa a.: saying to michael mckee, the market has their view, we have hours, they are

different, we are sticking with hours for now -- ours, they are different, we are sticking with o for nowurs -- with ours for now. tom: i will go to the sham you don't -- sahm you don't know. his mix of what is driving this inflation is something we need to focus on, and that is the part of inflation off of the pandemic that is supply driven or supply-side. explain that. claudia: a big mistake we are making at this point is acting like we can use past relationships in the economy to tell us what to do. the pandemic was extremely disruptive. we see that across many of our peer countries. subside monetary policy, subside

fiscal policy and i am concerned that that gets pushed to the side. that is why i go to adam shapiro's research. he as one of -- tom: the theme i am seeing into the imf meetings and my conversation tomorrow with the imf is that the analysis now, the guy have never seen is linking monetary policy with our fiscal policy. claudia: there are definitely some connections.i'm not sure the ones we are making in terms of financing the fiscal debt, that is a direct effect of these rates going up so quickly. i think you are seeing some signs of it, particularly in europe. we cannot let the fed go it

alone on inflation. the tools they use are going to cause a lot of pain. there are a lot of things fiscal authorities can do. lisa a.: have you been surprised by how resilient the economic data has been up to this point? claudia: i have been very thankful. the fed is trying to get a slow path back to inflation back down. no severe recession. that is where markets disagree with them. the only way the fed gets that done with the kind of rate increases they have done is if the consumers keep coming back and if the jobs remain there, even if it slows down. we were starting from a position of strength. that has never been the case going into one of these cycles. lisa a.: how high should the bar be for the fed to cut rates, given that they have the issue of inflation front and center? claudia: again we have this

disagreement about what kind of recession, if any we face. if we go into a severe recession, and the fed stays the course no matter what, that would be a big mistake. i take them at their word. they are going to keep at this until inflation is moving down to 2% whether i agree with that or not. tom: tell me about the speeds. it is a general policy english, if you will for newtonian calculus. the rates of change, including the huge surges we saw in interest rates has to be front and center. what are those speeds we are seeing an interest rates as it folds into policy? claudia: this is one contention i have with how the fed thinks about interest rates. they are august on the level, getting the -- focused on the

level. you raised interest rates so quickly. we know interest rate risk is there, but if we do not learn any lesson from silicon valley bank, that is an absolutely missed opportunity. as loretta mester was saying, we see the effects in the lending standards. it is there. it is coming. the last place it shows up his inflation. tom: we will be talking with geeta go up and after. she was speaking about the speed effects out there. what would be the effect, dr. sahm of a pause? would our world fall apart? claudia: no. i think it would give the world a chance to catch up with what the fed has been doing. jay powell has been clear.

we have started a disinflationary cycle. let everybody catch up. this is a speed issue. the fed went really fast. there is an argument for that. let it work. have some faith in what you have done so far. tom: i cannot say how controversial the tone is there from dr. sahm. there is a school of thought -- would everyone calm down and stop watching bloomberg surveillance, and slow down and breathe. lisa a.: and analyze what has happened to change the labor market fundamentally. claudia, can you make sense of this? there was a study that came out that showed americans are spending less time working by about half an hour. this is adding to the constraints in the labor market. how much is the fed taking into consideration some pretty

profound structural changes when they look toward what they need to see in terms of unemployment rates and wages. claudia: not enough. this is not a criticism of the fed. just because we got a steady last week, does not mean they were able to integrate the change in january. work from home, getting retirement done there is a lot going on and i have a lot of concern that when they are doing the forecasting those models are based on past relationships and they are not able to integrate what community members are telling them. that is really hard to bring in and real-time it is hard to bring research and. the bar is high. -- bring research in. the bar is high. tom: claudia sahm, sahm consulting. what do you want to talk about?

there are like 14 things to talk about . lisa a.: i think the fact that people are taking such a signal from the adp report, the fact people are buying into the fact that there is a softening in the economy is a shift in tone and it is happening not only in bonds, but also stocks. tom: within equities, bonds, commodities, buttressing, going up against resistance this is the first break down this morning. john was busting my chops that i said plunge, but 4.1% over the last few days -- where was he? he was at the australian grand prix. he missed 4.1%. i'm sorry, that is a plunge. lisa a.: this comes as loretta mester just said when they talk to banks, they are tightening

lending standards but not that much and things look good from their constituent fed numbers. they hear positive reports. squaring that with the dire take on the economy to come is tough. this has been the tension but it seems to be coalescing around tom: a greater softening. tom:if you are -- coalescing around a greater softening. tom: if you are driving, keep both hands on the wheel! i'm on my way to washington, and i will start with kristalina georgieva on what you have been talking about more than anyone i know -- china. lisa a.: there is a fantastic piece in businessweek about apple and even as they try to woo china they are quietly trying to shift production away from china. jonathan: we will move forward -- tom: we will move forward here offset adp report.

my conversation with kristalina georgieva on china and the imf. ♪

jon: good morning. the equity futures are down. the countdown to the open source now. -- to the open starts now. >> this is bloomberg be open with jonathan ferro -- the open with jonathan ferro. jon: live from new york, counting down the advertiser before test that appetizer before the maien